NELSON v. FORD CO
| Decision Date | 15 July 2010 |
| Docket Number | No. D054369.,D054369. |
| Citation | 112 Cal.Rptr.3d 607,186 Cal.App.4th 983 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Reginald NELSON, Plaintiff and Appellant v. PEARSON FORD CO., Defendant and Appellant. |
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Rosner, Barry & Babbitt, Hallen D. Rosner and Christopher P. Barry for Plaintiff and Appellant.
Horvitz & Levy, Lisa Perrochet, S. Thomas Todd, Bradley Scott Pauley, Encino, Tharpe & Howell, Christopher S. Maile, Soojin Kang, Sherman Oaks, Geller & Stewart and Michael S. Geller, Moreno Valley, for Defendant and Appellant.
Manning, Leaver, Bruder & Berberich and Halbert B. Rasmussen, Los Angeles, for California New Car Dealers Association as Amicus Curiae on behalf of Defendant and Appellant.
In this case, Pearson Ford Co., an automobile dealer, backdated a contract it had entered into with Reginald Nelson, the vehicle buyer. Backdating the contract rendered inaccurate the disclosed annual percentage rate (APR), and resulted in Nelson paying interest for a time period that no contract existed. Pearson Ford also failed to list in the contract Nelson's purchase of automobile liability insurance, and erroneously added the insurance premium to the sales price of the vehicle.
Nelson sued Pearson Ford alleging violations of the Automobile Sales Finance Act (ASFA) (Civ.Code, § 2981 et seq.), California's unfair competition law (UCL) (Bus. & Prof.Code, § 17200 et seq.), and the Consumers Legal Remedies Act (CLRA) (Civ.Code, § 1750 et seq.) (All undesignated statutory references are to the Civil Code.) The trial court certified the matter as a class action, with two classes: the backdating class and the insurance class. After a bench trial, the trial court found Pearson Ford not liable under the ASFA to the backdating class, but liable under the ASFA to the insurance class. It also found Pearson Ford liable to both classes under the UCL, but not the CLRA. The trial court issued certain remedies under the ASFA and the UCL, and awarded Nelson his attorney fees and costs under the ASFA. Both parties appeal.
Nelson asserts the trial court erred in finding Pearson Ford not liable to the backdating class under the ASFA, and not liable under the CLRA. Nelson also contends the trial court erred in the remedies it awarded under the UCL. On cross-appeal, Pearson Ford asserts it complied with the ASFA as to both classes, the class representative (Nelson) lacked standing under the UCL, and the trial court erred in the remedies it awarded under the ASFA and the UCL. Pearson Ford also contends the trial court erred in finding the Code of Civil Procedure section 998 offer it made to Nelson invalid; accordingly, it asserts that the attorney fee and costs award should be reversed.
We conclude that the portion of the judgment finding Pearson Ford not liable to the backdating class under the ASFA and the CLRA must be reversed. We agree with Pearson Ford that the trial court erred in the remedies it awarded under the ASFA and the UCL, and that the court erred in issuing a permanent injunction under the UCL as to the insurance class. We agree with Nelson that the portion of the judgment returning to Pearson Ford any sums remaining after the payment of all valid claims must be reversed, and direct the trial court to comply with Code of Civil Procedure section 384 as to both classes. We remand the matter to determine, consistent with the views expressed in this opinion, appropriate statutory remedies for: both classes under the ASFA; the insurance class under the ASFA and the UCL; and the backdating class under the CLRA. Finally, we agree with the trial court's conclusion regarding the invalidity of Pearson Ford's Code of Civil Procedure section 998 offer.
Nelson agreed to purchase a used 1998 Infiniti 130 (the car) from Pearson Ford for $9,995. On October 2, 2004, Nelson submitted a credit application, and Pearson Ford prepared a conditional sale or retail installment sale contract (the original contract) for Nelson's signature. (All undesignated dates are in 2004.) That same day, Nelson signed the original contract and took possession of the car. Under the original contract, Pearson Ford had the right to rescind the transaction within 10 days if it could not sell Nelson's loan to an institutional lender.
At the time of the purchase, Nelson did not have automobile insurance. Pearson Ford contacted an insurance broker who came to the dealership to sell Nelson an insurance policy. Nelson signed a “Due Bill” stating that he agreed to purchase the insurance for $250, and that the price of the insurance was “included in the total price of $10,245.00 as shown on line 1(A) of my contract.”
On October 8, Pearson Ford called Nelson and asked him to return to the dealership to fill out more paperwork, which Nelson did the same day. Nelson signed an “Acknowledgment of Rewritten Contract” stating that the original contract date was October 2, but that “the original contract ... has been mutually rescinded and no longer has any legal effect,” and the rewritten contract date was October 8. The Acknowledgment stated that, under the rewritten contract, the term of the loan, the monthly payment, and the total finance charges had changed in a certain amount. The Acknowledgment also stated: “I understand I am entitled to a complete refund of all consideration previously paid by me ...” and “I hereby freely and voluntarily elect to enter into a different contract for the purchase of the vehicle....”
On October 8, plaintiff signed a second retail installment sale contract (the second contract) consistent with the agreed-upon terms listed in the Acknowledgement. The parties backdated the second contract to October 2, the date they signed the original contract.
The original contract and the second contract listed the APR as 21 percent. However, interest started accruing on the second contract on October 2, six days before the parties signed it. This made the 21 percent APR listed in the second contract inaccurate. Because the parties signed the second contract on October 8, this decreased the actual number of days to the first payment due date from 45 to 39 days, making the correct APR 21.23 percent. The interest for those six days (October 2 to October 8) was $19.53, and the interest over the 36–month loan period on that figure was $7.47. Thus, Nelson paid an additional $27 finance charge. The second contract disclosed the total finance charge as $2,082.36, which included the $27, but the $27 was not separately itemized.
Additionally, both contracts improperly added the $250 insurance premium to the cash price of the car. This mistake caused Nelson to erroneously pay $30 in additional sales tax and financing charges on the insurance premium.
On March 2, 2007, Nelson filed this class action alleging that Pearson Ford violated the ASFA, the UCL, and the CLRA as to two classes of individuals. Class 1 (the backdating class) consisted of: “All persons who between March 2, 2003, and March 27, 2008, (1) purchased a vehicle from Pearson Ford Co. for personal use, and (2) on a later date executed an Acknowledgment of Rewritten Contract, and (3) signed a subsequent or second contract for the purchase of the same vehicle, which contract was dated the date of the original purchase contract and involved financing at an annual percentage rate greater than 0.00%.” Class 1 had about 1,500 members. Class 2 (the insurance class) consisted of: “All persons who between March 2, 2003, and March 27, 2008, executed a Retail Installment Sale Contract with Pearson Ford Co. that included in the ‘Cash Price of Motor Vehicle’ on Line 1.A.1 of the contract the cost of insurance.” Class 2 had about nine members.
On the first day of trial, the parties agreed there were no triable issues of material fact. Accordingly, the court indicated it would revisit previously filed motions for summary judgment or adjudication. The parties then tried this matter to the court based on certain stipulated documents and facts. The court ultimately concluded that there were no triable issues of material fact.
The trial court entered judgment finding no violation of the CLRA. Although it found a “technical violation” of the ASFA as to the backdating class, it determined that Pearson Ford substantially complied with the ASFA, and denied any relief to the backdating class under the ASFA. Nevertheless, the court found Pearson Ford liable to the backdating class under the UCL, granted injunctive relief and set restitution in the amount of $50 per class member. For the insurance class, the court found that Pearson Ford violated the ASFA and the UCL by failing to disclose the cost of insurance and adding the insurance cost to the cash price of the car. It also enjoined Pearson Ford from adding the price of insurance to the cash price of a vehicle in the future. Both parties appealed. The trial court granted Nelson's motion for attorney fees and costs in the amount of $368,418.50 and $8,453, respectively. It denied Pearson Ford's motion for attorney fees and costs. The trial court later granted Nelson additional attorney fees and costs in the amount of $21,144.50 and $3,342.60, respectively. Pearson Ford also appeals those orders. We granted the application of the California New Car Dealers Association to file an amicus curiae brief on behalf of Pearson Ford.
We address the appeals simultaneously because they present intertwined arguments regarding liability under the ASFA, the UCL, and the CLRA. We separately discuss the federal Truth in Lending Act (TILA, 15 U.S.C. § 1601 et seq.) as this legislation serves as a backdrop for liability...
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